Gas prices jump back above $3 a gallon

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Gas prices jump back above $3 a gallon

By JOHN WILEN, AP Business Writer Mon Nov 5, 4:08 PM ET

NEW YORK - Gasoline prices jumped back above $3 a gallon at the pump Monday even as concerns about the economy and increases in crude supplies sent oil prices lower.

Retail gas prices have been slow to catch up with soaring crude prices, which have gained nearly 39 percent since late August to a trading high of $96.24 on Thursday. Gas prices only started rising steadily in mid-October.

The national average price of a gallon of gas rose 1.5 cents overnight to $3.004, and has jumped almost 25 cents in three weeks, according to AAA and the Oil Price Information Service.

The sharp jump in gas prices could continue if oil keeps surging to new heights.

"The consumer has been relatively isolated from these prices," said Amanda Kurzendoerfer, commodities analyst at Summit Energy Services Inc. in Louisville, Ky.

But, she said, if oil prices don't retreat, gas prices could reach $3.50 or $4 a gallon by next summer.

Crude, meanwhile, closed lower after an erratic session that saw prices change direction several times.

Foremost on investors minds was the situation at Citigroup Inc., which warned Sunday it would take additional losses of $8 billion to $11 billion due in part to its exposure to risky mortgage debt. The announcement came as Citigroup CEO Charles Prince resigned, and reignited worries that the problems facing the subprime mortgage industry could spread, affecting the broader economy.

"Weekend news that another top banking head handed in his resignation due to subprime woes ... is roiling the markets," said Edward Meir, an analyst at MF Global UK Ltd., in a research note.

Energy investors worry that a slowdown in the economy would curb demand for oil and petroleum products.

Light, sweet crude for December delivery fell $1.95 to settle at $93.98 a barrel on the New York Mercantile Exchange Monday.

Earlier Monday, oil futures rose above $96 a barrel after the Institute for Supply Management reported that the economy's services sector grew at a faster-than-expected rate in October. But broader concerns about the mortgage industry's impact on the economy reasserted themselves on equity and energy markets as the day wore on.

Other energy futures also fell. The contract for December gasoline fell 5.84 cents to settle at $2.3811 a gallon on the Nymex, while December heating oil fell 2.98 cents to settle at $2.5439 a gallon.

December natural gas fell 41.9 cents to settle at $7.999 per 1,000 cubic feet on forecasts for milder temperatures next week in the Midwest and Northeast.

In London, December Brent crude fell $1.59 to settle at $90.49 a barrel on the ICE Futures exchange.

News on oil supplies and demand contributed to Monday's selling. Iraqi crude exports rose by nearly 200,000 barrels a day in October to 1.84 million barrels a day, according to PVM Oil Associates Ltd. in Vienna. In addition, Russian oil output rose 0.6 percent last month compared to the previous month, marking a new post-Soviet high of 9.93 billion barrels a day, PVM said.

A separate survey of analysts by Dow Jones Newswires suggests OPEC raised crude oil production in October by 1.24 percent, or 382,000 barrels from the previous month to 31.23 million barrels.

But the International Energy Agency on Monday said global crude oil demand will rise to 98 million barrels a day in 2015 from the 84 million barrels a day now, Dow Jones Newswires reported.

Prices were also pressured Monday by an easing in tensions abroad. Kurdish rebels released eight Turkish soldiers Sunday, moderating concerns about whether Turkey will launch attacks on guerrilla bases in northern Iraq. Escalating tensions in the Middle East could disrupt oil supplies out of the region.

Analysts think some traders and investors will try to push oil prices to the psychologically important $100 level this week. Crude prices are within the range of inflation-adjusted highs set in early 1980. Depending on the how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.

"I wouldn't see this sell-off today as the start of a correction," Kurzendoerfer said.